Posted 13 February 2012 - 06:30 AM
5 strategies for coping with a SUDDEN MONEY shift in your life
These practical measures can be helpful whether you've suddenly hit the jackpot or lost it all.
1. Take a timeout. "The first rule is to park the money," says Pearne. Don't do anything with it, and don't make any major decisions about your finances for at least three months, he advises. That allows time to get one's bearings and make plans.
2. Get organized. While it's not a time to make decisions, you need to figure out what the decisions will be, says Susan Bradley, and that requires getting organized. Go through your assets and
debts; pay any taxes and high-interest debt. Review your insurance coverage. Think about how you're going to live while you're in this planning stage.
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3. Figure out your bottom line. Pearne asks people to research their situation until they know the answers to these five questions:
- What is your net worth?
- What is your income?
- What are your fixed expenses?
- What is your tax obligation?
- How much is left over?
4. Know your priorities. The money moratorium is an opportunity to engage in what Bradley calls "a touchstone exercise." Basically, you keep asking yourself questions about what you want to
do, how you want to live, and what is important to you. Do you want to live in a cabin in Montana? Do you want to pay for all your children's educations? Do you want to engage in more philanthropy? Wait it out, get your bearings, pin down your priorities.
5. Assemble a financial team. When the emotions have subsided and you've given yourself some time to fully grasp your new financial situation, then it's time to enlist the help of an adviser. For the suddenly wealthy, that can mean an accountant, a financial planner, an investment adviser and an estate attorney. "On the soft side," says Pearne, "you may want a counselor or wealth psychologist."